EXPLANATORY MEMORANDUM TO THE NON …

1 EXPLANATORY MEMORANDUM TO THE NON-DOMESTIC RATING ( unoccupied property ) ( england ) regulations 2008 2008 No. 386 1. This EXPLANATORY MEMORANDUM has been prepared by the Department for Communities and Local Government and is laid before Parliament by Command of Her Majesty. 2. Description The Non-Domestic Rating ( unoccupied property ) ( england ) regulations 2008 ( the 2008 regulations ) revoke and replace the Non-Domestic Rating ( unoccupied property ) regulations 1989 ( 1989/2251) ( the 1989 regulations ) in their application to england . The 2008 regulations prescribe the class of property whose owner will be liable for non-domestic rates when the property is empty and the exceptions from that class.

2 The regulations will apply with effect from the financial year beginning on 1st April 2008 . 3. Matters of special interest to the Joint Committee on Statutory Instruments None. 4. Legislative Background With effect from the financial year beginning on 1st April 2008 , the 2008 regulations specify the class of property whose owner is liable for non-domestic rates when the property is empty (provided that the other conditions in section 45(1) of the Local Government Finance Act 1988 are met). This class is prescribed by regulation 3 as, broadly speaking, all properties.

3 Regulation 4 specifies exceptions to the class so that rates are not payable in respect of the properties described in that regulation when they are empty. The 2008 regulations revoke and replace the 1989 regulations in their application to england . Regulation 3 has been carried over from those regulations and the exceptions in regulation 4 are largely the same as before. However, regulation 4(b) of the 2008 regulations provides that the owners of certain industrial properties which have been empty for six months or less will not be liable for rates, whereas this exception was not previously time-limited.

4 Regulation 4(l) is a new exception, which provides that companies in administration are not liable for rates in respect of empty properties they own. 5. Extent This instrument applies to england . 6. European Convention on Human Rights As the instrument is subject to negative resolution procedure and does not amend primary legislation, no statement is required. 1 7. Policy background The Chancellor of the Exchequer announced in the 2007 Budget report the Government s intention to modernise business rates in respect of empty properties. The purpose of the reforms is to enhance the supply of commercial property available to new and existing businesses and thereby to help to reduce rent levels, which currently place a burden on the competitiveness of the UK.

5 The Rating (Empty Properties) Act 2007, which received Royal Assent in July 2007, gives effect to key elements of the Government s reforms, primarily by raising the rates liability for empty commercial properties from 50% to 100% of the basic occupied rate, following an initial three month rate-free period. This is extended to six months in the case of industrial properties. These rate-free periods will be provided by the 2008 regulations . The three month exception in respect of all properties is carried over from the 1989 regulations while, as noted above, the new six month exception in respect of industrial properties replaces the previous permanent exception in support of the Government s policy of increasing the supply of such properties.

6 The 2008 regulations also introduce a new permanent exception from rates in respect of empty properties owned by companies in administration. This exception supplements other measures intended to promote a rescue culture for insolvent companies that have viable underlying businesses. This additional exception is being introduced in light of responses to the Government s consultation proposals set out in Modernising Empty property Relief a consultation paper. That consultation ran from 9th July to 1st October 2007 and a copy of the paper is archived at . A full list of consultees was annexed to the paper (Annex B) and these included all local authorities in england , the Royal Institute of Chartered Surveyors, the Institute of Revenues, Rating and Valuation and the Insolvency Service.

7 The paper covered a range of issues and proposals arising from the Government s reforms to empty property rates and a summary of replies and the Government s response can be found at . The proposal that companies in administration should benefit from a permanent exception from rates in respect of empty properties they own was supported by 54% of consultees who responded on the issue, compared with only 15% who supported retention of the current position where such companies pay rates in respect of their empty properties. Responses to this issue generally supported the Government s broader policy objective of rescuing companies with an underlying viable business.

8 It was recognised that a company s liability for empty property rates will be a significant factor for an administrator in considering whether there was a viable business capable of rescue. Those in favour of the introduction of a permanent exemption considered that the treatment of insolvent companies in administration should be made consistent with the treatment of insolvent companies and individuals subject to bankruptcy proceedings, who are already excepted from liability for rates in respect of their empty properties. The Government will be monitoring the success of its reforms to empty property rates and will work closely with the Local Government Association, the rating professional bodies and the Valuation Office Agency to ensure that it is kept appraised of how the reforms are working on the ground.

9 8. Impact 2 An Impact Assessment has been prepared for this instrument and is reproduced in the Annex to this MEMORANDUM . 9. Contact Richard Enderby at the Department for Communities and Local Government Tel: 020 7944 4224 or e-mail: can answer any queries regarding the instrument. 3 Summary: Intervention & Options Department /Agency: Communities and Local Government Title: Impact Assessment of : unoccupied property regulations 2008 Stage: Statutory Instrument Version: 1 Date: Related Publications: Modernising Empty property Relief: Summary of consultation replies and Government Response Available to view or download at: Contact for enquiries: Richard Enderby Telephone: 020 7944 4224 What is the problem under consideration?

10 Why is government intervention necessary? Owners of empty non-domestic property currently qualify for significant relief from rates, receiving a minimum 50% relief from the occupied business rate. UK office rents are amongst the highest in the world, and there is significant pressure on land for new housing and commercial developments. It does not, therefore, make sense for other taxpayers to subsidise owners to keep properties empty. The measures will modernise relief from non-domestic rates in respect of empty properties to provide a positive incentive to bring vacant shops, offices, factories and warehouses back into use.